On October 25, 2024, the Securities and Exchange Commission (“SEC”) adopted amendments to certain rules in the Covered Clearing Agency Standards (the “Amendments”) aimed at improving risk management and resilience of covered clearing agencies (“CCAs”). Although not directly relevant to firms who are participants in one of the clearing agencies, the amendments could result in changes to margin requirements imposed by clearing agencies. The Amendments:Continue Reading Clearing Agency Participants Take Note: Covered Clearing Agency Resilience Rules Could Bring New Margin Requirements
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The Next Market Structure Rule Arrives: SEC Adopts New Minimum Pricing Increments and Access Fee Caps
On September 18, 2024, the Securities Exchange Commission (“SEC”) unanimously adopted new rules amending Regulation NMS (the “Amendments”). The Amendments (1) establish new minimum pricing increments (or “tick sizes”) for certain stocks priced above $1.00, (2) establish a new maximum fee for access to quotations, and require that all such fees be calculable as of the transaction date, and (3) accelerate the implementation of operational amendments to the “round lot” and “odd-lot information” definitions previously adopted to harmonize with the adopted NMS amendments.Continue Reading The Next Market Structure Rule Arrives: SEC Adopts New Minimum Pricing Increments and Access Fee Caps
Trio of SEC Enforcement Actions Underscores Importance of Internal Controls, Including in M&A Context
In the past few weeks, the Securities and Exchange Commission (“SEC”) has announced three settled enforcement actions alleging violations of the internal controls provisions of the federal securities laws. The cases are notable less for the SEC penalties involved—which ranged from no penalty to $400,000—but rather for the other, more dire consequences the companies experienced as a result of internal controls failures, such as financial restatements, delayed SEC filings that led to an exchange delisting, and serious employee misconduct that went unchecked. The cases underscore the importance of establishing and maintaining effective systems of internal control over financial reporting. Continue Reading Trio of SEC Enforcement Actions Underscores Importance of Internal Controls, Including in M&A Context
California Updates Diversity Reporting Law for Venture Capital Funds to Start in 2026
Earlier this month, the California State Budget released for approval by the state legislature included an updated version of Senate Bill 54 (the “VC Diversity Law”). The latest version contains several updates to the VC Diversity Law, including revisions to the definition of “covered entity;” that said, as we discuss below, it is not clear that the scope of coverage will meaningfully differ. The updates also delay the initial reporting date to March 1, 2026 (from the original date of March 1, 2025), and reflect a change to the California governmental division responsible for enforcing the law.Continue Reading California Updates Diversity Reporting Law for Venture Capital Funds to Start in 2026
The “VACATED” Heard ‘Round the World: What’s Next after the SEC Private Fund Adviser Rules?
What’s next after PFAR? In its highly-awaited June 5th opinion, the Fifth Circuit Court of Appeals vacated all of the SEC’s Private Fund Adviser rules (“PFAR”), agreeing with industry trade associations that the SEC lacked the necessary statutory authority to adopt PFAR. In our latest Client Alert, we examine the opinion, aspects of…
Keener, Almagarby, and the Scope of the “Dealer” Definition: Potential Implications for Fund Managers and other Investors
With its decision in Securities and Exchange Commission v. Keener (May 29, 2024), the U.S. Court of Appeals for the Eleventh Circuit has now twice in the span of four months affirmed a broad interpretation of who is considered a “dealer” for purposes of the securities laws. More specifically, the Eleventh Circuit upheld the Securities and Exchange Commission’s (“SEC”) position that a person engaged in the business of purchasing—for its own account—convertible debt notes from microcap issuers (also referred to as “penny-stock” companies), converting the notes into common stock, and selling that stock in the market meets the definition of a “dealer” under the Securities Exchange Act of 1934 (the “Exchange Act”), and must therefore be registered as a dealer with the SEC. The decision in Keener closely tracked the same Court’s decision in Securities and Exchange Commission v. Almagarby, Microcap Equity Group (February 14, 2024), in which the Eleventh Circuit agreed with the SEC that the plaintiff Almagarby had been acting as an unregistered “dealer” in violation of the Exchange Act by obtaining convertible debt of microcap companies for his own account, converting the debt into common stock, and then selling the stock. Continue Reading Keener, Almagarby, and the Scope of the “Dealer” Definition: Potential Implications for Fund Managers and other Investors
Fifth Circuit Vacates Private Fund Adviser Rules in Entirety
On June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit issued its opinion on National Association of Private Fund Managers et. al. vs. Securities and Exchange Commission, the lawsuit brought by a group of trade associations representing the private funds industry against the Securities and Exchange Commission (“SEC” or the “Commission”) challenging the validity and enforceability of the SEC’s Private Fund Adviser Rules (“PFAR”). …
Continue Reading Fifth Circuit Vacates Private Fund Adviser Rules in Entirety
Statute of Limitations for U.S. Sanctions Violations Extended from Five to Ten years
On April 24, 2024, President Biden signed into law H.R. 815, a foreign aid bill containing a provision that doubles the statute of limitations (SoL) for civil and criminal violations of U.S. sanctions and other national security programs from five years to ten years.Continue Reading Statute of Limitations for U.S. Sanctions Violations Extended from Five to Ten years
SEC Announces Reforms for Internet Investment Advisers
On March 27, 2024, the U.S. Securities and Exchange Commission (“SEC”) announced amendments to the Internet Adviser Exemption, which permits investment advisers that provide advisory services through the internet (“Internet Investment Advisers”) to register with the SEC under the Investment Advisers Act of 1940 (“Advisers Act”) if they do not otherwise have enough assets under management to be eligible for registration.[1] The final rule seeks to address technological and industry advancements since the original Internet Adviser Exemption was adopted in 2002. The final rule also amends the interactive website requirement, eliminates the exception for advisers with de minimis non-internet clients, and imposes additional reporting requirements for Internet Investment Advisers on Form ADV.Continue Reading SEC Announces Reforms for Internet Investment Advisers
SEC Approves Amendments to Enhance Disclosure of Order Execution Information
On March 6, 2024, the Securities and Exchange Commission (“SEC” or “Commission”) adopted amendments to the disclosure requirements of Rule 605 of Regulation NMS for order executions of stocks listed on a national securities exchange.[1] The final rule amendments expand the scope of entities that must comply with, and order types and sizes that must be reported under, Rule 605, and requires time-based metrics to be reported at a more granular level. This is the first substantive update of Rule 605 since it was adopted in 2000. Continue Reading SEC Approves Amendments to Enhance Disclosure of Order Execution Information